interest rate fallacy

Bond Bull Bull

By |2018-10-30T22:45:02+00:00October 30th, 2018|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

On February 12, 1999, the Bank of Japan announced that it was going full zero. Japan’s central bank would from that day forward push the overnight uncollateralized lending (interbank) rate to the zero lower bound. Further, it pledged to keep it there until Japan’s economy recovered. The economic slump in the nineties had been by [...]

Seriously, Wherefore Art Thou Collateral?

By |2017-12-07T17:35:32+00:00December 7th, 2017|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

I’m going to go out on a limb and claim there is something seriously wrong in repo. All jokes aside, I know it sounds like a broken record but the dimension that matters is not intermittent collateral problems so much as the greater intensity to them and in a condensing timeframe. Escalation is a description [...]

Ahead, Not Behind

By |2017-11-03T17:04:29+00:00November 3rd, 2017|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

Back in September, the FOMC announced that it was in October going to start normalizing its balance sheet. The policy statement issued that day included all the usual qualifications of “solid”, “strengthen”, and “picked up.” The near-term risks to the economy, it was written, “appear roughly balanced.” Not all was well with the economic situation, [...]

Wherefore Art Thou Collateral?

By |2017-09-07T16:40:36+00:00September 7th, 2017|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

The US Treasury as a result of the government’s bloated response to the Great “Recession” has been forced in notes and bonds to reopen their auctions each and every month. Before then, reopenings were less frequent. They weren’t infrequent, but the Treasury wasn’t just auctioning 10s every month. In 2007, for example, the Department conducted [...]

‘Nowhere To Go But Up’ Survives Because The Fed Refuses To Be Honest About Its Assessment of the Output Gap

By |2017-04-04T19:05:42+00:00April 4th, 2017|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

The Federal Reserve under Ben Bernanke committed several unforgivable mistakes during his tumultuous tenure, but cumulatively they could be easily summarized as “they really don’t know what they are doing.” Time and again whoever followed monetary policy and the conventions built upon it were led either off a cliff or somewhere just less dramatic. Federal [...]

Another Line to Cross Before Reflation; Nuns and Neutrality

By |2016-11-30T18:30:20+00:00November 30th, 2016|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

Talking with my colleague Joe Calhoun yesterday, he was eager to share with me something he found in the (virtual) pages of the Wall Street Journal, a perfect sign of the times. In a story about a group of nuns in Germany taking their financial future into their own hands, Joe couldn’t help but shake [...]

More Indications of Labor Slowing

By |2016-09-06T12:46:36+00:00September 6th, 2016|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

The Federal Reserve’s Labor Market Conditions Index (LMCI) fell to contraction again in August. After rebounding in July for the first positive reading of 2016, the LMCI dropped to -0.7 in the latest update. As usual, revisions have reshaped the levels of indicated problems throughout the past two years, but overall the trend remains. From [...]